While vacationing, Maria saw the vacation home of her dreams. It was listed with a sale price of RM500,000. The only catch is that Maria is 40 years old and plans to continue working until she is 65. Still, she believes that prices generally increase at the overall rate of inflation. Maria believes then she can earn 9% annually after taxes on her investments. She is willing to invest a fixed amount at the end of each of the next 25 years to fund the cash purchase of such house when she retires. (a) Inflation is expected to average 5% per year for the next 25 years. Calculate the cost of Maria's dream house when she retires. (b) (c) Calculate how much must Maria invests at the end of each of the next 25 years to have the cash purchase of the house when she retires. Calculate the difference in total cash investment if Maria invests at the beginning instead of at the end of each of the next 25 years,.
While vacationing, Maria saw the vacation home of her dreams. It was listed with a sale price of RM500,000. The only catch is that Maria is 40 years old and plans to continue working until she is 65. Still, she believes that prices generally increase at the overall rate of inflation. Maria believes then she can earn 9% annually after taxes on her investments. She is willing to invest a fixed amount at the end of each of the next 25 years to fund the cash purchase of such house when she retires. (a) Inflation is expected to average 5% per year for the next 25 years. Calculate the cost of Maria's dream house when she retires. (b) (c) Calculate how much must Maria invests at the end of each of the next 25 years to have the cash purchase of the house when she retires. Calculate the difference in total cash investment if Maria invests at the beginning instead of at the end of each of the next 25 years,.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Q3
While vacationing, Maria saw the vacation home of her dreams. It was listed with a sale
price of RM500,000. The only catch is that Maria is 40 years old and plans to continue
working until she is 65. Still, she believes that prices generally increase at the overall rate
of inflation. Maria believes then she can earn 9% annually after taxes on her investments.
She is willing to invest a fixed amount at the end of each of the next 25 years to fund the
cash purchase of such house when she retires.
(a)
(b)
(c)
Inflation is expected to average 5% per year for the next 25 years.
Calculate the cost of Maria's dream house when she retires.
Calculate how much must Maria invests at the end of each of the next 25 years to
have the cash purchase of the house when she retires.
Calculate the difference in total cash investment if Maria invests at the beginning
instead of at the end of each of the next 25 years,.
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